ByJoe McDonald, Associated PressJune 29, 2010

BEIJING — Google Inc. said Tuesday it will stop automatically routing users in China to its Hong Kong site after Beijing threatened the company with the loss of its Internet license in their latest skirmish over censorship.

Google shut down its China-based search engine March 22 to avoid cooperating with the communist government's Internet censorship and has rerouted users to Hong Kong. But Google said regulators told the company its Internet license, which allows it to operate a music download service and other features in China, would not be renewed after it expires Wednesday if that tactic continues.

"They made it clear to us that they did not think the redirect was acceptable," said a Google spokeswoman, Jessica Powell. She declined to say what reasons the government gave for its objections.

The loss of permission to operate a China-based website would damage Google's access to an Internet market that already is the world's biggest and still growing fast, with 384 million people online at the end of 2009.

Under the new measure, instead of being automatically switched to Hong Kong, visitors to Google.cn see a tab that says, "We have moved to google.com.hk." Clicking on that takes users to the Chinese-language site in Hong Kong, which is Chinese territory but has Western-style civil liberties with no Internet filtering.

Automatic rerouting would end completely in the next few days, Google's chief legal officer, David Drummond, said on a company blog, leaving open the possibility that some Chinese users still were being sent to the Hong Kong site on Tuesday.

There was no immediate word from Beijing about whether the move was sufficient for Google to keep its Internet license."This new approach is consistent with our commitment not to self-censor and, we believe, with local law," Drummond said.

"We are therefore hopeful that our license will be renewed on this basis so we can continue to offer our Chinese users services via Google.cn."But Chinese regulators might not be satisfied, said Edward Yu, president of Analysys International, an Internet research firm in Beijing."It's not clear today whether just doing it that way is also permitted," Yu said.

Google's popularity in China was unhurt by the automatic rerouting and advertising revenues stayed strong, Yu said. But he said the added click to reach Hong Kong, if Chinese regulators allow Google to operate that way, might drive away some users."If traffic is hurt, then advertisers will panic and cut spending," he said.

Another Google spokesman, William Echikson, said the company believes its "approach stays true to our principles, is consistent with the Chinese view of the law and ensures that google.cn stays alive, and that is something our users in China have been vocal about."He added: "We are still committed to not censoring search results."

A foreign ministry spokesman, Qin Gang, said he had not seen Google's announcement and could not comment on it. However, he added, "I would like to stress that the Chinese government encourages foreign enterprises to operate in China according to law."

Beijing encourages Internet use for business and education but tries to block access to pornography or subversive material.Google launched its China-based site in 2006 after the filters blocked many Chinese users from reaching its main site.

The Mountain View, California-based company announced in January it no longer wished to comply with Chinese censorship and said hackers working from China tried to steal its code and break into e-mail accounts of human rights activists.The statement was an embarrassment for China's leaders, who want foreign companies to help develop its technology industries.

Google hopes to keep a research center in China, an advertising sales team that generates most of its revenue in the country and a fledgling mobile phone business.It has a 30 percent share of China's search traffic, versus 60 percent for local rival Baidu Inc. Baidu is expected to pick up any advertising lost by Google, but industry analysts say the lack of competition if the U.S. company leaves could slow the development of what Chinese leaders see as an important industry.

In a statement June 8, the government said the Internet played an "irreplaceable role in accelerating the development of the national economy." But it vowed to keep a tight grip on online content and to block subversive material.

Regulators block websites such as Facebook, YouTube and Twitter to prevent dissidents and human rights or Tibet activists from using them to spread criticism of Beijing.